The Private Sector Could Save Medicare

Commentary, Healthcare & Welfare, Frontier Centre

Every tick of the clock brings us closer to an ominous day of reckoning for Medicare. In about ten years, the crowded generation of baby boomers will enter the most expensive phase of its need for health services. Yet the political class’s intellectual power failure over fixing Medicare’s problems shows no signs of abating. We are running out of time.

Last October, the venerable Fraser Institute’s latest tracking of the time it takes a patient in Canada to receive treatment, averaged across all provinces and medical specialties, showed that it increased from 17.7 weeks in 2003 to 17.9 weeks in 2004. The Canadian Institute for Health Information reports that total government spending on health care in those years rose from $123 billion to $130 billion. All the new federal money pouring into Medicare, with average annual increases far above the inflation rate, is clearly not working. The problem is formidable.

If we can find a way out, we had better do it quickly. A hint of the solution in contained in an informative book published late last year by the University of Toronto Press. Written mostly by a local economist, Philippe Cyrenne of the University of Winnipeg, it assesses the use of private health care in other developed countries with universal access systems. That excludes the United States, of course, a fact that may insulate its findings from the anti-American demagoguery so predictably generated by any mention of the words “private” and “profit” in the same sentence as “health care.”

A very up-front fellow like most economists, Dr. Cyrenne offers up on the dust jacket of Private Health Care in the OECD: A Canadian Perspective an important but often ignored distinction: “In contrast to the United States, all of these countries share a commitment to universal coverage. By contrast with Canada, they have embarked further down the road toward integrating private-sector involvement in health-care delivery and financing.”

His research considered countries that offer universal health care by means of two basic models. Britain, Sweden and Australia use a system similar to Canada’s, with services paid for by taxes; they have all experienced problems of the same sort as ours, and have all experimented with reforms that include more private participation, with notable success. Germany, France and Belgium, on the other hand, finance health care with mandatory, dedicated payroll deductions, augmented with provisions for people who do not work; they have always had a vibrant private health sector, composed both of dispersed providers of all sorts and competing insurers. In the latter, waiting lists are non-existent.

Although Cyrenne says little that is critical of Canadian Medicare, the information he provides in his carefully presented book speaks for itself. The three countries, like us, which structure health care as a social welfare program have, unlike us, engaged the private sector in creative, innovative ways.

In fact, Britain’s Labour government has allowed the National Health Service to venture even further a field from the reforms Cyrenne describes, with wholesale contracting out of entire specialties. Sweden’s Social Democrats vowed they would renationalize St. Göran’s, Stockholm’s largest hospital, when they returned to power, but they didn’t. Why not? Because Capio, the for-profit company that bought it, runs the enterprise 30 percent more efficiently. Private hospitals have always been key players in Australia, and its parallel system of private medical insurance – the dreaded “two-tier” devil – was not only allowed to continue, it is subsidized by the government to extend its reach, to ease demand on the public system.

Cyrenne’s information on the three countries with health systems based on social insurance principles is perhaps the most fascinating. Germany, France and Belgium not only split purchasers from providers, the variety of actors performing each function would easily confuse Canadians used to our simple-minded monopoly. Hundreds of insurers vie for payroll premiums, and they pay money out for services to hundreds and thousands of different medical facilities. Although Cyrenne never says so, perhaps contestability is the reason why they have no waiting lists. If you don’t have a captive market, you try harder.

Needless to say, that sort of thinking is anathema to Canada’s world-is-flat Left, more comfortable with flabby orthodoxies than results. “The proliferation of investor-owned, for-profit clinics acts like a viral infection in the body of Canada’s public healthcare system, feeding off and weakening it,” according to the Canadian Centre for Policy Alternatives. The union-backed group, Keep Medicare Public, rejects the creative British program for expanding hospital capacity through lease arrangements as a bookkeeping sleight-of-hand.

Tell that to Reston-area farmer Doug Zarn. Last summer, diagnosed with a cancer that could kill him in 12 weeks, he was told that he would have to wait 10 to 12 weeks before he started treatment. He received life-saving treatment in another country within 72 hours.

Philippe Cyrenne is a strong defender of the values that inspired Medicare. But when asked his impression of the contracting out now routine in Britain, he said “I think what they’re trying to do is see whether they can get better care for their patients.”

That’s the bottom line. The Europeans have it right, universal access plus a diverse mix of competing providers is the way to go. The world is round, not flat. The monopoly has to go.